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Reference: Carol Dahl and Mine Yucel, (1990). Dynamic modelling and testing of OPEC behaviour.Citable link to this page:


Dynamic modelling and testing of OPEC behaviour Subtitle: OIES paper: EE11

Abstract: Although conventional wisdom suggests that OPEC is a cartel, many studiessince 1973 have focused on other underlying forces to explain and forecastOPEC behaviour. Economic theory suggests that natural resource producersshould dynamically optimize, and a variety of studies have relied on dynamicoptimization. Hence, we build a model consistent with dynamic optimizationand jointly test dynamic optimization with other hypotheses prevalent in theliterature. We use econometric analysis of quarterly data from 1971:l to1986:4.We find that individual OPEC countries behave in quite dissimilarways, suggesting that a cartel hypothesis is not appropriate. Under ourspecification, there was no evidence of dynamic optimization or a strongtarget revenue model. Some evidence indicated that Iran, Libya, SaudiArabia, and the United Arab Emirates (UAE) may include a form of targetrevenue in their goals. Iraqi behaviour was most consistent with a staticcompetitive market structure. While a static non-competitive marketstructure was not rejected for Algeria, capacity constraints are more likelyto have dictated Algerian policy. A static non-competitive market structurewas not rejected for Nigeria, Saudi Arabia, Kuwait, and Venezuela. Given thedivergent behaviour of OPEC countries, we conclude that OPEC, rather thanbeing a weak cartel, consists of a non-competitive core of swing producers,each swinging to its own rhythm.

Publication status:PublishedPeer Review status:Reviewed (other)Version:Publisher's version

Bibliographic Details

Publisher: Oxford Institute for Energy Studies

Publisher Website: http://www.oxfordenergy.org/

Issue Date: 1990

Copyright Date: 1990 Identifiers

Isbn: 0-948061-36-7

Urn: uuid:d83c96eb-5c1e-4da0-8581-3ad0d1d3c912 Item Description

Type: Working/Discussion paper;

Language: en

Version: Publisher's versionKeywords: OIES cartel coefficients dynamic behaviour dynamic modelling dynamic optimization hotelling lags OPEC property rights model swing producers target revenue model Tiny URL: ora:10252


Author: Carol Dahl - institutionUniversity of Oxford researchGroupOxford Institute for Energy Studies - - - Mine Yucel - institutionUnive

Source: https://ora.ox.ac.uk/objects/uuid:d83c96eb-5c1e-4da0-8581-3ad0d1d3c912


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